In recent years, financially savvy millennials have burst on to the investment scene, choosing to adopt a more proactive approach to managing and investing their money.
This, combined with an open-mindedness as to how and where their money is invested and millennials notoriously being short on spare time is reshaping the investment space.
Such shifts have presented in the form of unconventional, mobile-friendly money management and investment apps rising to prominence.
The influx of fintech apps centred around investing your change from purchases, social investing and financial education are rapidly changing the investment and financial management landscapes, demystifying them in the process.
Take Moneybox, a micro-investment app that rounds your purchases to the nearest pound and invests the change in Stocks and Shares ISAs.
Other apps like Acorns, allow people to invest their spare budget into the stock market, set recurring investments and make one-time, no-minimum capital injections to boost their portfolio.
As we move away from traditional views on investing, which had implied such activities reserved for the well-heeled among us, investing is now trending amongst the younger generation and viewed and a great way to pass time with friends.
This has not gone unnoticed as innovative apps are fast-capitalising on these opportunities. Take Voleo, an investment app aiming to make investing a communal activity. People join from social groups such as an investment club or fraternity.
Each person contributes a minimum of $500 towards their group’s portfolio. The investment options – from listed stocks and ETFs in the United States are then researched and proposed to the group by its members.
Votes are cast to determine the course of action and then these are decisions are executed – all via the app.
The aftershocks of such developments have overall been rather positive. Sectors once considered non-accessible or too costly for the average millennial are now represented in an interesting, easy to use and mobile-friendly format.
Users have also experienced the added benefit of having more autonomy over their investments.
However, such fintech apps have not evaded criticism, with some arguing that as profitable as micro investing seems, the figures do not add up.
For instance, the monthly flat fee of $1.25 per month for use of the popular Acorn app, has been cited as incredibly high when the alternatives are considered.
Yet arguably, such platforms are widely viewed as a bit of fun rather than a serious investment hub.
They provide an excellent opportunity for millennials and the like to test the waters, explore their curiosities and acquire knowledge that will aid their financial decisions in the future.
Despite accusations of millennials being short-sighted, the last few years have also seen an increase in the younger generation taking responsibility for their financial education, planning, and health. Consequently, DIY finance companies have experienced an upward trend in their user base.
Nerd Wallet, for example, is a financial education site that provides tips on products such as credit cards, mortgages and personal loans.
This site has become an authority in the personal finance sphere and gone from strength to strength since its inception in 2009 by teaching its customers how to make wiser financial decisions and make their money work for them.
The Simple app, a budgeting, and saving tool that helps people meet their financial goals is also gaining considerable ground in the sector for similar reasons.
With so many changes taking place in the financial technology space, industries closely related to fintech are reactively undergoing their own reforms to stay relevant and we need not look far to find them.
Alternative funding options have become available to small to medium businesses (SME’s) such as peer to peer lending platforms and flexible lines of credit that work similar to overdrafts.
Consequently, SME’s are increasingly bypassing the infamous red tape and bureaucracy typically associated with traditional bank loans; to make their business goals a reality.
These new offerings are also transforming the way small businesses control their finances; making them more efficient, well-resourced and better able to manage their cash flow.
The shift places startup owners in the driver’s seat and is fuelling the growth of the entrepreneurial landscape at an impressive rate. For example, Fintech start-ups like Growth Street cater to such small businesses with their flagship product, Growthline.
A flexible line of credit starting from £25k- £2m that works like an overdraft created for start-ups and SME’s with £100k+ in revenue.
Growth Street also advocates responsible lending and spending by offering cashflow forecast tools to help their clients decide what they can and cannot afford.
Due, an invoicing, payments and cash flow management platform, ensure they always know their numbers.
The changes have not stopped here. Gen X’s and millennials have shown a preference towards using their investment to make a difference.
Social responsibility and ethicality feature prominently at the core of their investment philosophies, much more so than their predecessors. In fact, according to Barclay’s Impact Investing report in which 2,000 investors were surveyed, a rise of 15% was recorded in allocations to impact investments since 2015, led largely by millennials and the trend shows no sign of slowing down.
Yet something is causing the older generation to be wary of impact investments. Barclays also reported that 43% of investors surveyed under 40 years old had made impact investments compared to only 9% of people aged between 50-59 years old.
Also, just 3% of investors aged over 60 chose to make impact investments. This serves to reaffirm that the vast variance investment styles exhibited by baby boomers and millennials. cannot be understated.
Although the younger generation continues to drive innovation in fintech, only time will time whether such apps and services have a permanent place in the financial management space. But, if their progress is anything to go by, the odds may well be their favour…
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